As April 15th looms and tax season starts entering its frenzied home stretch, individuals and corporate accountants contemplating their tax return may find themselves wondering just how much they can, let us say, fudge the numbers. Don't be tempted. In recent years, the IRS has become markedly better at spotting potential tax fraud, and more aggressive in pursuing it. In 2006, the agency collected a record $59.2 billion via 1.4 million audits.Revenue has grown the last seven years, and is up 75 percent since 2000. In particular, the IRS has increased its targeting of tax cheats in the middle-class (between $25,000 and $100,000 in annual income) and super-rich (greater than $1 million a year) brackets. It audited 436,000 middle-class households and individuals in 2006, three times as many as in 2000.The chances of being audited rose commensurately , to 1 in 140 in 2006 from 1 in 377 six years earlier, according to the New York Times . Meanwhile, the above-$1 million club faced a 1-in-11 chance of an audit in 2006, up from 1 in 20 three years earlier ( PDF format ). All the while, the IRS has been able to steadily reduce the number of audits of honest taxpayers, according to Jeff Butler, director of research databases for the IRS. Butler oversees the IRS' research data warehouse, key to the agency's recent improvements. "What we do is, in some respects, cutting-edge," said Butler, with the restrained pride of a longtime bureaucrat (he's been at the IRS for a total of 15 years, with an additional five-year stint at the Department of Transportation).We're getting to be as sophisticated as the largest credit card companies or banks." A world-class data setup He may be too modest.Unifying all tax returns and related information from the past 10 years, the 150TB Compliance Data Warehouse is comparable in size with the largest known databases in the world, such as ones run by YouTube, AT&T, the CIA and others. It's not just the CDW's size that impresses, but its capabilities.IRS researchers can use it to "search and analyze hundreds of millions or even billions of records at a time, so we can answer questions, look at trends, do simulations and optimization modeling," Butler said.And those analyses, rather than taking weeks or months as they would have in the past, now take hours or days, he said. Using the CDW, the IRS was able to discover areas where tax cheating had become rampant, such as the Earned Income Tax Credit, or small-business tax shelters, Butler said. Researchers have also used the CDW to discover or confirm who is at risk for falling behind on their tax payments (young graduates laden with college debt, for instance, are particularly susceptible). Naturally, the system has its limits.It doesn't assist IRS agents in the process of actually conducting audits.

Free tax filing for stimulus checks

Thanks to the Economic Stimulus Act of 2008, more than 130 million American households will receive economic stimulus payments beginning in May, but for some, the cost of having a tax assessor prepare their tax return, which is about $100, is not even worth the trouble of getting their stimulus payment.That is why Debra White Finke & Associates is offering to do 2007 returns for free - no strings attached - to those who are only filing to receive their stimulus check.Donna Wilson-Orozco, a partner of Debra White Finke & Associates, said they found this as a way that they could give back to the community after all the community has done for them.

TAXES

Many small business owners live in fear of an audit by the IRS, but the reality is that relatively few will ever have to go through an exhaustive examination of their books, invoices and receipts.

What's more likely is that they'll catch the notice of IRS employees with omissions or mistakes – or by claiming too much for deductions such as entertainment or home office expenses.

"If your arithmetic is wrong, or your calculations are wrong, those are the types of things that create inconsistencies and often create exams that you don't need," said Steve Hurok, tax director in the Woodbridge, N.J., office of the accounting firm BDO Seidman LLP.

The IRS doesn't have enough staff to do a high number of full-blown audits. It's much more likely you'll get a letter from the IRS questioning an item on a tax return.